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Joseph E. Stiglitz, recipient of the Nobel Memorial Prize in Economic Sciences in 2001 and the John Bates Clark Medal in 1979, is University Professor at Columbia University, Co-Chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and Chief Economist of the Roosevelt Institute. A former senior vice president and chief economist of the World Bank and chair of the US president’s Council of Economic Advisers under Bill Clinton, in 2000 he founded the Initiative for Policy Dialogue, a think tank on international development based at Columbia University. His most recent book is Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump.

Political union of European countries is to be established in a brother-like manner.Also voice of democracy must be respected by the powerful countries.(I do not want to name the country).More importantly fiscal federalism through Union (fiscal Union) is very essential.

With all the high-level fretting over the minutea of standard 20th century models of nation states and central banking systems and so forth and so on.......
I think most of the intellectuals and economists suffer from a problem usually described as ..."cant see the forest for the trees".
I think we entered a paradigm shift almost twenty years ago, and the momentum of an obsolete 20th century economic model has simply propelled our world this far before the signs of breakdown become difficult to ignore.
The Internet has morphed from a Scientific Community's data tranfer tool.....into a irreplaceable resource of the Economic Community.
But we have failed to consciously observe this obvious reality.
Internet transactions make national borders largely irrelevant.
There is nothing "private" about the internet, as every single packet of data has a to/from address....if every single packet did not, the internet would FAIL.
We live in an age where the governments fail to have the political will, the prescience to modify tax codes and legal regulation of the Internet to propel our economic lives to new levels of properity for the entire planet.........
1. Trade Zones become increasingly important.....such as China's Shanghai Group vs NAFTA/EU , with Russia playing both sides.
Dar es Islam may be asserting control over its own area, there's also the British Commonwealth, ...while Africa and South America may remain exploited "free-fire zones".
2. International Banking becomes largely irrelevant. Offshore Banking has no meaning. The successful Trade Zones will enforce equitable banking laws that allow bank customers to trust that the system will not arbitrarily confiscate deposts....as is happening in Europe right now.

1. The economic problems in western Europe (now the EU) started long before the creation of the Euro.
2. The essential problems in the EU are twofold:
2.1 the money wasting state consumption (the cost of governing), more so than the social programmes; allthough, when you talk with employees in the employmentoffices (Arbeitsämter), the fraudulous claims seem staggering.
2.1 the inflexible and very expensive labour markets, that make any competition with China and other asian countries very difficult.
3. Whatever QE there was since 2009, went to
3.1 the memberstates and their political parties, who continued their wastefull state consumption, instead of streamlining their operations (See eg Christian Noyer in "Le POINT" from August 2012).
3.2 the financial industries, who used the money to expand business, instead of reinforcing liquidity and solvency; later they parked the money with the ECB at better rates, than they had to pay themselfes for the funds.
Hardly any of the money went into productive (private) investment, that should have relaunched the economies; hardly amzing given 2.1.
4 All the new QE's, that IMF and many other (US) economists are demanding, will be wasted again. Keynes wrote allready in 1936 in the introduction of his "The General Theory …", that "Furthermore, it will be convenient to exclude 'frictional' unemployment from our definition of 'involuntary' unemployment." So, fiscal and monetary programms will not work.

Let's go over this: Sachs tells Krugman to cut government spending, and Stiglitz tells Europe to stop austery and increase spending.?! As my dad said, You can line up all the Nobel economists end to end and they still won't reach a conclusion! At least not the same conclusion! One of these geniuses has to be wrong. But I suspect they are BOTH wrong! Maybe if the governments did less, and concentrated on keeping the bankers from stealing from the public, our economies would improve.

To begin with it is obvious Stiglitz has come under the influence of progressive, I'm sorry, REGRESSIVE policy. He still needs to bash Bush because he's remains under the spell of "right place at right time" Clinton. Give me a natural organically growing economy and I'll take credit for it, too.

"One of the EU’s strengths is the vitality of its democracies." If so, then let those democracies free. Who in their right mind can believe that adding a new sovereign academically and politically organized government on to existing bloated sovereign governments is going to be economically stimulating? Oh yes...the people who have never had a real job, in the real economy of he private sector.

The pledge: “The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by, let alone get ahead,” said Obama in his State of the Union. “And too many still aren’t working at all. Our job is to reverse these trends.”

The takeaway: The economy has undeniably improved, with the creation of 10.9 million jobs over the past 57 months. In the latest jobs report, from November, the unemployment rate remained steady at 5.8% – the lowest level since the recession. Third quarter GDP growth was revised upward to 5.0%, up from last month’s estimate of 3.9%.—the strongest growth the U.S. economy has seen in over a decade. Last week, the Dow Jones industrial average topped 18,000 points for the first time – a huge difference from when Obama took office, when the Dow hovered around 8,000 points. Gas prices have also plummeted.

Obama also fulfilled his pledge of launching four new manufacturing hubs this year, tightened tax rules to deter U.S. corporations from skirting taxes by merging with foreign companies and launched a new retirement savings accounts for low-income employees called MyRA.

Still, Obama wasn’t able to get the federal minimum wage increased and was unable to wholly tackle the nation’s complicated tax code—something he has pledged to do. And the soaring stock market have left some critics on the left to grumble that his policies have benefitted the wealthy at the expense of ordinary workers. many of whom are still hurting.

Overall grade: B+

Not bad, considering that the economic crisis occurred not all that long ago, in 2008/09.

http://www.msnbc.com/msnbc/obamas-2014-report-card

As for the EU, those economies were in terrible shape long before the formation of the EU, Greece was as bad as ever, Italy was teetering, Spain and Portugal had Middle Eastern levels of youth unemployment and France and Germany were top-heavy with debt.

On the interactive The Economist Global Debt clock map, you can set the year and then roll over each country on the map as far as year 2000, to see just how bad some of those economies were/are:

http://www.economist.com/content/global_debt_clock

What I'm saying is that economic problems have plagued (especially southern Europe) economies for decades.

The creation of the EU hasn't made it any worse, as you can see for yourself on the debt clock map and with Germany bailing out Greece and others (after barely recovering herself, from an unfathomably costly reunification with East Germany) the EU project must still count as a slight positive, economically speaking.

I am afraid the die may be cast. 60% youth unemployment, urged by Germany as a necessary price and tolerated by the rest of Europe's elite, is a very dangerous indictment of the political structure. The reasoning will go - 'If this is the product and price of democracy, then ...'. The stranglehold of self-preserving, mutually supporting elites is Europe's evolved aristocracy. You are right. Lives are being ruined and they don't give a damn. What is the Latin for "Keep this mess going till I can get out with my pension!" That is the credo that rules the rulers.

Great. I suppose everybody agrees with Stiglitz´comments of the need to promote growth and abandon austerity policies. But Stiglitz´s diagnose should be accompanied by policies recommendations. Quit the euro? Issue tons of new money? Push inflation? Lower salaries? Give free subsidies to greek citizens?. It is always good to promote eternal happiness leaving to others the decisions how to do it!

Stiglitz is the perfect example of Freud's discovery that we human beings are deluded to believe in our conscious minds. He is blindly driven by his unconscious biases. Almost nothing he prescribes would actually benefit those who he professes to care for.

I mostly agree, but it has to be said that the UK government at present the conservatives led the way in austerity against the past Labour government that nearly crippled Britain. This has been a success although many families take home pay and disposable income would not agree. The success is that the economy is growing -slightly but it is, and more importantly they deficit is being reduced. I don't think its a clear black or white decision on whether austerity works or not in the current market, but rather a question on whether the folks in control of that part actually know when it should be used in what systems and where and of course where not. The EU are indeed drowning in hubris. One only has to take a 2 hour trip on the Eurostar from Brussels to Kings cross sitting next any one of their esteemed MP's who will tell you on no less than five occasions throughout the trip that you of course know that they have an MBA you know? Yes those type of people.......Maybe its because I couldn't hide my amusement at the idiot and he obviously worked out that I wasn't taking him seriously when he said the UK is done, kaput, finished because of its play with leaving the EU. I agree with your understanding of the single currency issue but its the mentality not the lack of institution's that is the problem. Goodness knows we don't need more friggen rules and laws. Germans save money. They have been for the last 20 years. This is the root of the problem for the EU. The concept of a single currency sounds well and looks swell but its a saints nightmare to balance because the one thing that economies need to thrive is greed. Socialism - secretly what every European wants; has greed pegged neatly into the limelight even though it of course works exactly the same way as it has always done. The Germans know that its their lifestyles that will have to pay when the euro goes for a ball and their savings are not part of the plan. This is where it all goes pete tong.

In reiterating that Democracy will not permit the perpetuation of austerity, JS hits the bulls eye. 300,000 from France have made Paris-on-Thames, along with perhaps as many Italians, Spaniards, and the Greeks. The outward migration engineered by the faultlines within the Eurozone has crossed 2 million to Britain alone and growing. Brussels can claim all the credit for redirecting millions into The Anglosphere - just like others before them since nearby Waterloo. Real Capitals create centripetal forces not centrifugal. The Anglosphere is now nearly 500 million in size - same as Europe unionized. Professor Stiglitz iin repeatedly showing the light, ought to inspire EU to create a New World inside the Eurozone. Brussels perhaps is like a Third World Capital, unable to create jobs within and exporting migrants in even larger numbers. Time for Europe to have a Real Capital - Democracy will not allow unlimited austerity.

- "But this economic madness cannot continue forever. Democracy will not permit it." Joseph Stiglitz -
I'm not so sure. It pretty much looks like European democracy was unable to prevent so many missteps taken which have have led Europe to its present state of affairs; millions of Europeans are now enduring tremendous hardships though no fault of their own (unles you count voting for the wrong people as a fault). Will Europe change by the democratic practice of voting? It doesn't look that way, at least not for the time being. Who would they elect that would display the necessary "Umph" to rectify Europe's economic direction?

Democracy is not always what is written on the tin. It may be to the well educated European, but it has a different nuance in Africa. Take South Africa for example. I recently returned from a trip across that country and although everything was green - fantastic rainfall; the country has again descended into that dark abyss of electricity load sharing. Yes the country regularly has to have blackouts for three hours region to region as the electricity is "shared". How can this be? The true reasons are enough to base a book on because its a long story and has many plots and twists but generally it will be blamed on apartheid which of course has nothing to do with it any longer. The country was simply not ready to swap power from 6 millions whites to 43 millions blacks and believe me that is not a racist remark but the world simply believes that democracy is democracy. At what cost? Solomon's Baby?

THE CELEBRATED FRENCH CARTOONISTS WOULD HAVE PROFITED FROM A BETTER KNOWLEDGE OF PHYSICS AND ITS QUASI UNIVERSAL APPLICABILITY, INCLUDING TO SOCIAL VALUES AND INTERACTIONS, ACTIONS AND REACTIONS, THEIR CONSEQUENCES, AS EMBODIED IN NEWTON'S THREE LAWS OF MOTION, OF WHICH PERHAPS THE EASIEST TO UNDERSTAND IS HIS THIRD LAW: "To every action there is an equal and opposite reaction." THIS LAW IN PARTICULAR SHOULD BE A GUIDING PRINCIPLE IN ALL ASPECTS OF HUMAN ENDEAVOR AT THIS COMPLICATED TIME OF INTERRACIAL AND INTERCULTURAL INCOMPREHENSION AND DISRESPECT, SADLY, AND PRECISELY, WHEN HUMANITY IS STANDING ON THE BRINK OF THE PRECIPICE. NEWTON'S FIRST LAW: "An object at rest will remain at rest unless acted on by an unbalanced force. An object in motion continues in motion with the same speed and in the same direction unless acted upon by an unbalanced force." THIS IS THE LAW OF INERTIA, A LABEL WHICH, SIMPLY PUT, STATES, IN PHYSICAL OR SOCIAL TERMS, THAT THINGS WILL STAY THE SAME UNLESS SOMETHING, OR WE OURSELVES, ACT TO CHANGE THEM. NEWTON'S SECOND LAW: "Acceleration is produced when a force acts on a mass. The greater the mass (of the object being accelerated) the greater the amount of force needed (to accelerate the object)." THIS MEANS THAT IT TAKES WORK TO INCREASE THE SPEED OF MOTION OF A MASS, OR OF THE CHANGE REQUIRED IN ONESELF OR OF ANYONE ELSE, OR OF ANYTHING ELSE IN SOCIETY, AND THAT THE GREATER THE MASS, OR THE GREATER SOCIAL CHALLENGE, THE GREATER THE WORK WILL HAVE TO BE.

Thank you for your feedback Tim and Dean. Caps do look like yelling, shouting or screaming sometimes, and it really just happened that I had the caps lock on as I typed; unfortunately this website does not allow post editing. Further, sometimes the form clouds perception of the content, which is what really matters, or becomes a significant distraction.

The ECB had to replace Eur1.5tn roughly three quarters of bank deposits including inter-bank loans that afrom 2010 fled 'north' out of Portugal, Italy, Ireland, Greece, Spain. Two third of this has returned or been replaced. But, the renewed anxiety about Greece is causing a another phase of capital flight. Germany and other net exporters and UK (the first economy to benefit from US recovery) are not throwing money at the Mediterranean economies in crisis; the net flow is the other way about. The EU differes from USA insofar as extreme trade and payments imbalances are explicit within the EU and Euro Area without sufficient compensating rebalancing transfers as in the USA.

For the 34%, a question. What 'belief' do you have in mind which you want to respect? The belief that only Islam shall exist? That women are a lesser person and that beatings are their God-given fate? That anyone wishing to leave Islam shall be killed as an apostate? That Free Will does not exist? That any semblance of Due Process be eliminated?

Austerity policies are intuitively chosen by politicians who do not grasp how piublic and private sectors interact and who assume they can act significantly independantly of each other. There is limited understanding of how the public sector has sole responsibility for dragging national GDPs out of recession and how in EU especially this has to be an EU-wide effort. yet, the smaller the European economy the more it is assumed to be less dependant on EU-wide policy when the opposite is true.

The danger of a true euro crisis is becoming ever clearer, not least because of an over-confidence of western politicians that they have it under control. The attitude to Greece, notably from Germany and France, is 'go if you want' which may be seen as an undue interference in their political process, but more importantly, suggests a lack of understanding of how even a small country's exit from the euro could cause chaos.
It is ever more essential that a full plan for separation of individual EZ members' debt be established, preferably before it is necessarily needed. The key factor here is to make the giant leap to a cashless society, so all debt is electronic and therefore identifiable.
This ties in with the other important facet of managing the current fiscal imbalance, namely the improvement in tax collection. The poor have got poorer, the rich have got richer mainly due to the latter's ability to avoid and evade taxes.
At the enormous risk of over-simplifying the situation, this 'simple' solution answers both issues.

Dear Prof. Stiglitz, "...before reason is restored?": What do you mean by this, what kind of "reason" do you mean? When the ECB gives "fiat-money" to private banks for 0,15% and enables interst-rates of up to 7% and more, this is madness. The money should go directly to the States for 0,15% int-rate. Or else sovereign interst-free complementary currencies in every country parallel to the Euro.
Joseph Meyer, Belgium

You are absolutely correct. The market should be allowed to function with respect to commercial bank solvency. The ECB's fiat currency should have been allocated to national treasuries not commercial banks. That is what should have happened in the U.S. but didn't because Americans are too stupid to understand their monetarily sovereign government, unlike banks never faces a resource constraint.

Euro dependent nations, being currency users, have no monetary sovereignty and cannot create their own sovereign currency like the U.S.

Unfortunately, bailing out banks tragically compounds the distortion in political control and power as well as income/wealth distribution, and does not resolve the broader dysfunction caused by financial fraud, loss of confidence in the financial sector, sluggish economic recovery, intolerable levels of unemployment, stagnant incomes, increase in crime, disintegration of families, neighborhoods, etc.

When all the central bank does is mark up checking accounts to create marketable assets, it is a clear signal to citizens that taxes for revenue are obsolete. There just was not, in the case of the U.S., $29 trillion in tax revenue to bail out TBTF and other sectors. It could only come from fiat currency operations. The world citizenry needs to repeal central bank charters, replacing them with public treasuries managed by the people not the 1%.

Dear Prof. Stiglitz thanks for your valuable article which addresses a number of critical issues that have led to these crises and stimulates reflections on how to overcome some of these serious challenges.
I believe you may also perhaps appreciate at the following link my article on the same topic which I have posted last summer (2014). Best regards, Prof. Dr. IVO PEZZUTO

Europe's bureaucracy is an overgrown tumor on the EU economy. Austerity is the inevitable, unpleasant cure. Just like chemotherapy that weakens the cancer patient initially to spur recovery, austerity weakens GDP and Debt to GDP initially. What is your alternative to this unpleasant therapy?

Germany has said repeatedly they will not give money away. Will you, Stiglitz and Krugman and others give them your money? I think not. Then what are you proposing? Let the cancer run its course?

By the way, mentioning G.W. Bush in an article about Europe is a transparent cheap shot from a cheap person.

Who exactly do you think should suffer from the austerity you propose? Obviously you don't want the rich to suffer for destroying regulatory structures and wrecking the economy in mad fits of greed. Which particular poorly paid citizens should be their scapegoats? Do you have some names?

Some question are unanswerable, some answers are unquestionable. Unfortunately, the free market is one of the latter. In theory, it should work, but in practice it does not. What we call a free market is not a free market at all, but a market dominated by monopolies in which competition is easily crushed. Europe's problem is that it is dominated by its private banks, which got too greedy, lost too many stupid bets and thereby went insolvent. Now, good money is being thrown after bad to prop the banks up. Japan, since its bubble burst, has the same problem, as does the U.S. Let the banks and the oligarghs go bust, and let the oligarch's do what they say everyone else should do. Let them pick themselves up by their bootstraps.

@Gary,
That is what all you market fundamentalists say. In theory it SHOULD work. That is what you believe. In practice it does not, not because the state exercises monopoly control? What product does the United States government produce? Aside from the infrastructure that enables markets to work, and a small amount of social insurance, none at all. Get on google Earth and take a look at countries that don't have a strong government. Where are the roads? Where is the infrastructure? Where are the factories, or the highly productive farms?

Where would this country be without government intervention? Would we have had the Erie or the Panama Canals? Would we have had the the western territories without the army to slaughter the natives? Would we have had the rairoads without the land grants? Would the railroads have had foriegn investors without some government back? What happened to all those freely competing railroads anyway? They went bust, just like the competing telecoms of the 1990s, resulting in the Long Depression.

What a government does is to establish some rule of law, under which reputable firms can operate without being put out of business by disreputable firms. A certain amount of caveat vendor is neccessary, to protect, not only the public interest but private interests, as well. Many of the early progressives were business people who suffered competition from unscrupulous firms.

Do you really think we would be in the mess we are in now if Glass Steagle had remained in play, and derivatives had been regulated, as Brooksley Borne set out to do before Robert Rubin intervened. Personally, I don't think so, but then you may disagree.

Regan might have told you that government was the problem, but I was in Washington during the Reagan years and it was a free for all for weapons purveyors and rentiers looking for a piece of the action. They LOVE the government. They just want you to think they don't, to get you to vote to lower THEIR taxes. Because they don't want to share with anybody, and least of all with you.

Read your economic history, beginning with The Great Transformation, and you will see how necessry the State was to facilitating the Capitalist system.

'Free markets' in today's world of oligopolys, monosponys and monoploys as well as corporate control of the state simply cannot exist. The term is a contradiction even if one limits consideration to who's money will be accepted in exchange. If 'free markets' existed currencies would compete. They don't because they are ordained and managed by the state.

Survival of the fittest is not the model the world needs. Corporate Cooperatives are more egalitarian than current institutional arrangements. They are also extremely difficult to establish. Once established they are socially, economically and politically more efficient and effective than capitalism.

A free market can exist. The biggest and worst monopoly is the State and its functionaries who cannot leave it alone. The effort by government to correct the problems of monopolies gives only rise to larger and more entrenched monopolies whose aligned protectors are the State and its regulators who would otherwise be unemployed. So far, few governments have shown the light hand needed to allow free markets to thrive.

Every member government of the eurozone and EU bow to domestic special interests and game the system creating incoherence and antagonism.
Stiglitz underestimates the attachment of the majority to the EU project. Further he misunderstands this deflation is intentional and it's purpose is to reset the southern economies. It's working.
As for SYRIZA, Greece needs a new social contract, paying taxes in exchange for education, healthcare and a modest welfare system, and an end to policy domination by the oligarchs which has created insurmountable barriers to entrepreneurship in favour of incumbents.

The euro was badly designed and it turned out to be a big mistake. The EU leaders should had known better but they are incompetent, all of them. They applied tactics that take us back to the USA before the war of independence, when the British had the "brilliant" idea to change the currency of their colony. It seems that there will be more conflicts in Europe. Greece is the victim of tactics that have to do with colonization and imperialism, all of them dated. The southern part of Europe is bankrupt and the fate of the northern parts is even worse. Also you must not forget that Greece marks the end of the east and the beginning of the west. Now that this country collapsed, nobody will guard the borders. ISIS, Al Quaida, all the immigrants will pass over to Europe without a single resistance. Actually, they may find supporters and collaborators. Its time that the rest of Europe faces Islam on its own, especially now that it is at everybody's doorstep. The Greeks were tortured in the past, they died, they were left orphans and were disabled in order to defend Europe. And look at what we got in return: slandering and looting. Europe is looting Greece, lets face it. So it is fair that, after the collapse Byzantium and the collapse of Greece, Islam is ringing the bell of each and every house in Europe. Fair, isn't it?

The crisis we are living broke Europe in several ways, and I don't think it can ever be glued ever again. With this crisis we all end up knowing that:

The racial supremacy and Prussian/Northern values are still in place…
The admittance of two classes of people in Europe, the ones who are to blame and pay for the crisis, who over spent in houses and tuition fees and who must see their wages cut because structurally they should never make more than minimum wage, and the other class, the ruling class, the ECB directors who retire with millions while demanding for the reduction of wages and pensions, the national supervisors who fail miserably in their tasks and get promoted to ECB vice-presidents, the CEO of banks who go bankrupts and are intervened by governments and retire with golden parachutes, the EU president who gets elected even promoting policies in his own country for European tax evasion. You name it and you will see it in the Old Europe…
Structural measures are cutting wages and promoting immigration of talents, not investing in the productive infra-structure of a country….
For Europe its ok for bureaucrats and eurocrats to make policy, and elected officials must obey the policies design in other countries, and even when this policies are wrong and make no sense, you must still make them rules and laws…
That in Europe you cannot print money to finance fiscal policies, and that your bank deposits have no insurance whatsoever…
That regulators and supervisors act only has counselors and have no responsibility whatsoever on the markets they supervise…
That it’s ok for a government to spend several billions saving a bank, but there is no money to cut unemployment…
It’s ok to violate the constitution of your country but god forbids going against any European treaty….
That mankind throughout history was wrong, and that a country should not have his own currency but use somebody else’s currency

indeed a popular backlash will become inevitable and populist leaders will be elected on a spending ticket. but the modern poor simply lack the coherence and will to sustain revitalizing reform. gone are the days of resolute revolutionaries. so democracy will go down with more putin-like figures likely to take the reign in many countries that are currently mired in recession.

Well, glady someone finally treated the American recovery as it really is: a languish growth fueled, not only by the shale gas development and American energetic autossuficiency, but also by the Dollar's role as global reserve currency, letting him flood the economy w/ cheap money, while US public debt keeps rising to astonishing levels. Ok, so America's safe from Japanese/Euro alike stagnation scenarios while it seems legit to endlessly print money. What I find rather interesting is the decoupling most of analysts do by treating the European fall as solely an European problem and the American rise as a given fact.
The problem is the domino effect that already triggered the 2008 crisis in an American-European flux will, in the future, flux the reverse way. Europe is teetering apart, and no longer solely the Europeans peripheries - even though there lies the most affected economies [Greeks are still less 20% rich per capita than they were in 2007] - but rather on its very core, w/ France barely hanging on the positive side of inflation, Italy's on its 7th or so semester of factual recession and Germany presenting an ever littler ADB index and deflationary pressures. Moreover, Russia, one of our biggest commercial partners, is also falling apart - the funniest here is how Washington keeps it anti Moscow policy and cannot foresee the hazard created if Russia goes down (remember it's not 1998 Russia where its GDP stood similar to the Dutch, it's an UK sized economy).
The problem indeed lays in the Euro architecture. Firstly, almost all of the member states crossed the lines (even Germany) from its very inception. Secondly, and logically, keeping economies such as those of Finland or Austria in the same monetary bag (w/ no complementary devices of restore competitiveness between regions, e.g. fiscal policy, parallel economies) of Greece or Spain is the utter madness and any economist w/ good sense could predict that; thirdly, since 2008 that European policy centers should have acknowledge that, not only there 2 types of geographical Euros - the North and the South -, but 2 types of Euro systems - the evil and the good, being that the 1st is the current monetary scheme: it doesn't permit devaluation, it doesn't answer gaps in competitiveness and only goes back to the interests of some states; the 2nd is one where the various European capitals make sense of the fact that a single currency cannot go hand-in-hand with 17 different economic polities and fiscal strategies - if you want to have a single currency, you need not only a much bigger coordination of macroeconomic policies but also a banking union, probably a partial fiscal union to compensate for widening gaps and it should have, since 2001, created a buffer reserve of money to alleviate states in times of crisis.
So yes, basically, if you want a single currency, you MUST want more Europe. And now that the confusion is settled and fingers are been pointing around Europe, we cannot retract the currency project, otherwise we leave stagnation scenarios to officially fully enter recession ones. So, thank you dear political leaders, for trapping this European generation into this embroil but, given you've done so, at least have the decency and the guts to keep carrying w/ the needed reforms. More Europe. Not for Brussels. For your nationals, for f***'s sake.

I would not be so sure that the US is in a "tenuous recovery" while Europe is languishing. There has been one very important development in the US, brought by markets not any policy, which is fracking and unconventional oil. The impact of this development will be shortly tested, as new oil supply drops the price to or perhaps below break even price. Both the US and Europe (and the rest of developed world) have in fact the same problem that remains unaddressed even in principle by everyone, including prof Stiglitz. Western labor cannot compete with developing world labor which, by western standards, works for food. The solution of Western world has been to replace wages with debt. Same in the US as in the Eurozone. The solution that Prof Stiglitz (and Krugman) advocate is to grow the debt further, except make it openly public debt now. Prior debt was ostensibly private, though most of it was unpayable, so it ended up public anyway. How will growing the debt further help? Has not this been tried in Japan?
What one needs is to re-examine assumptions. Of free trade. Of interaction between free trade and limits on the aggregate world economic growth due to resource constraints, and thus limits on the growth of so called middle class. Finally, limits on quantitative economic growth imposed by naturally changing demographics in the developed countries.
None of this is being even attempted here. Just pontificating about the stupidity of others. Not particularly helpful, even if it makes some feel good about themselves.

Europe is not constrained by lack of resources. Labour and capital resources lie unused in Europe. Europe is constrained by lack of demand.

Lack of demand is caused by the refusal of European elites to allow fiscal stabilisers to operate. Yes, the US has fracking but it also allowed welfare payments to continue and allowed deficit funding after a fashion. Europe needs fiscal expansion more than it does fracking.

If Europe allowed individual states deficit financing sufficient to restore growth and allowed the ECB the authority to back the financing of those deficits then growth would resume.

Even if the greeks and the Italians 'stole' some of the money, the northern states would still be winners by virtue of increased exports to the Southern states and increased growth within their own borders. A little inflation would be a very good thing here.

If the idea is to make life so unbearable that everything explodes and then brings change and the new utopia.... I say organic change is better. Better to make small practical improvements that last and make life better for people than blow everything up so you have a clean slate.

Look at the Arab Spring - first the revolution then the return to religious or secular dictatorship. All the Arab peoples are asking for is a chance at a better life. But the Arab elite seem to view it as an all or nothing proposition. Either we have the resources or you do.

Greed, fear, stupidity. Same in the case of Europe and the Arab states. The answer is to let the fiscal reins loosen in both cases.

Let the other guy have bit of the gravy. You don't have to give him the lot, just a bit.

Joseph Stiglitz's article comparing US and EU's recovery identifies policy and attitude differences. The US and UK's recoveries now appear established. He sees the US recovery as medium and since the UK's is roughly on a par, doesn't explain the persistent commentary in the media on rates. Professor Stiglitz has described the US's recovery correctly. It does not seem sufficiently strong to justify any near term movement on rates, nor the UK's. When a decision does finally occur in these two countries, it should not be instituted in the same time of year or even in the same year necessarily. Professor Stiglitz then moved on to the EU and to the Eurozone in particular, and states again the one size fits all complaint. Yes, reform is needed structurally in the member states, in the EU as a body, for which the UK will probably be a useful catalyst, and in the Eurozone as a financial system. Today we saw reports of the ECB's proposal to buy sovereign bonds in the Eurozone to the value of 500 billion euros to stimulate growth and to run alongside the Investment Plan. This was good news; perhaps it will be the first part of QE, in stages, as required, which has worked well in other major countries. I was a little anxious about analysts anticipating that Greece and Portugal might not be included.

Perhaps another reason for EU poor performance is its relative performance compared to China which went from a nothing to the Worlds largest economy (on PPP measurement) in the shortest imaginable time.

In fact, the Greeks are able to borrow based on their membership in the Euro, so get an interest rate that did not reflect the risk. Banks bought Greek debt, relying on the EU to bail Greece out of problems. It is this implicit guarantee that has to be removed. If Greece had been paying realistic interest rates for its debt, it would never have done the borrowing. Separation of member state debt from community debt is the problem.
While Germans may not tolerate being guarantors of Greek debt, that is what they turned out to be.

What EU needs is a wealth tax levied by EU to finance all its commitments including investment in priority areas. Wealth invested in R&D to be deductible. Tax heavens to be brought under control. This is no problem if there is a political will.
Financial transaction tax; Yes but it should be reserved for UN. Peacekeeping and R&D for Health and nutrition.

Personally I'm not ready for communism and a wealth tax seems firstly a donkey ride to socialism and a horse buck to communism. No thanks. Just because some are not wealthy and deserve to be - no opportunity; but mostly because some are stupidly wealthy and definitely don't deserve to be, is no reason we should start looking for wealth tax. Rather lets fix what's wrong with our society and stop paying people to not work ergo benefits. Lets first stop the free stuff and then see how much friggen taxes we need to run things. Children's education and elderly - and only those who need it of course. Now that's about as close as I would like to get to taxing wealth otherwise lets just get rid of democracy and capitalism.

As usual, JS has successfully argued against austerity for the umpteenth time. Europe was not unionized for austerity - but for prosperity. Perhaps the only outcome that is certain is the flow of outward migration - as within the Eurozone, hopes of salvation seeks to evaporate with every month. The reason the remedy is not created is because the Eurozone has been able to export migrants out - into The Anglosphere. The Institutional structure that creates growth and prosperity has nit been empowered. All that the Brussels bureaucracy creates is a Capital without accountability and responsibilities. Unlike the other Real Capitals - London, Tokyo, Beijing and Wahington - who have to find the Real answers, and not just redirect outward migrants to the New World. There is a New World waiting to be created - within Europe.

You are right as to the EU problem, but your timing is horrible and damaging to Greece and the EU.

Your article will be used here in Greece to strengthen SYRIZA. If you knew just a little bit about Greece, you'd know that SYRIZA is NOT the new. It is the OLD trying to come back as new. Many of its members are from the old PASOK. They want to bring back ALL the bad practices that gave us the biggest debt in the world, like old type of government intervention in everything and a huge public sector - they even want to bring back Olympic Airways which cost us untold billions. They are against privitizations and have said they will undo any that have been done. They want to take over control of the banks and have voted against ALL the new strict tax regulations, AGAINST the ability for the tax authoritues to access bank accounts. These things are IN THEIR OFFICIAL PROGRAM! They are the OLD - please understand this!!!!! This is what you are helping.

There is no one in Greece that wants austerity. The current govrnment has faught hard for this (that's why we elected them) and has achieved miracles and with these results are continiously pushing the EU for better terms and a stop to the austerity. The only difference is that SYRIZA will undo all these much needed changes and make all the old mistakes all over again.

Your voice is heard loudly and would be welcomed AFTER the elections. At this time it gives the COMLETELY WRONG message. Please find out about Greece before spewing out damaging theories in the midst of our battle for survival.

Well, if the crisis and malaise continue- and i see no reason why they would not- at least the rest of the world could benefit from the emigration of young Spanish, Greek, and Italian citizens to places farther abroad. Chile looks nice.

Recent studies have revealed that the Target2 payment transmission system has allowed central banks in periphery countries to ignore the buildup of large national current account deficits. The capital shortfalls have been made up by government borrowing from core Eurozone countries with current account surpluses. As public debt has increased, increased risk of default by deficit countries led to higher borrowing costs. Current account deficits have continued to grow in peripheral states with weak economies. The mismatch of economies in the Euro zone cannot be wished away by any amount of institutional reform. The deficits built up by the PIIGS countries can only be reversed by fiscal transfers (austerity) by debtor nations or purchases of assets (QE) by creditor countries. In either case, they do not offer any relief from inbuilt differences in output between countries. In short, both austerity and QE will only postpone the breakup of the Euro zone.

The tag team of China and India will run away with the world economically speaking if the West doesn't get its collective act together shortly.

The U.S. is slowly rising out of its war-induced economic dysfunction, and the EU is either holding fast or backsliding, depending on your view.

This is not the optimum way to counter a powerfully rising China and India. (I have nothing against either country, but only point out that we too could be rising. Or, we could continue sinking in comparison to them)

Already, China is the world's biggest economy (and polluter) while India is ramping-up to (possibly) eclipse even that stellar accomplishment.

Who would've foreseen this when Dr. Kissinger 'played the China card' all those years ago? Yet, here it is.

Nothing short of the economic viability of the West is at stake, meanwhile, some in the EU and the U.S. want to focus on matters of middling importance instead.

A dominant America and a generally strengthening Europe has been the story in the postwar era, but that era may end suddenly, if we don't act now with vision and resolve.

If we don't, China and India will leave us in their dust. And if Russia joins them in any substantive way, we will have utterly lost our preeminent place in the world.

Getting agreement on the TTIP and fixing the EU economy are no longer EU-only or America-only interests. What goes down in the EU now affects the U.S. and vice versa in an unprecedented fashion.

Whether North America or the EU likes it, for the first time since WWII, we NEED each other and we need each other performing at best possible speed and power.

Otherwise we'll be eaten by a big red dragon, or torn up by an Indian tiger. Or both.

I'd say our chances are 50/50 that the West will rise to the occasion and do whatever is necessary to get the EU economy back on track (without destroying what is great about Europe) and to strengthen the North American economy -- in order to, at the very least -- counter and keep pace with the rising Asian giants for the next few decades until their demographic and growth rates peak.

I don't think we in the west will rise to the occasion. It is already too late. The reaction to the lifeline that was Russias deal with Ukraine - circa 2 Billion dollars loan, came with conditions that a few students managed to coax sniper rifles made in the UK to start the cascade that saw Crimea elect to join with Russia.....and the world still sees Putin as the bad guy. If the US can play chess they best get their game together because the EU have only pawns left. China has been buying up all the gold and is the number one miner of it. Why? Because they are tired of flushing dollars down the loo and figure they might as well make a play for the worlds reserve currency. Alienating the Russians and mismanagement of the crisis saw a commercial jet destroyed - all of which could easily have been avoided if the EU power players could play chess.

"Reform of the structure of the eurozone itself, and a reversal of austerity policies" in the same breath and sentence is an American dream. The ideal "reform of the structure of the eurozone?" The end of the Euro. Wouldn't that come handy to the US dollar, economy and politics? Keep on waiting and hoping, but please have a seat while you wait.

Many who have been vociferous in criticizing income and wealth inequality such as Paul Krugman and Joseph Stiglitz have not pointed to the increase income inequality as the cause of the depression. Those on the left who might be the natural proponents of a more progressive tax system have not connected the dots. They have a different theory as to the cause of the depression. They are adherents to the regulatory fallacy, the belief that the depression was caused by insufficient regulation.

To determine if someone is an adherent of the regulatory fallacy ask this question: Do you believe that given the degree that the tax burden was shifted from the rich to the middle class, was there any type of regulatory policy which would have prevented the financial crisis? If they answer yes, they are adherents to the regulatory fallacy.

In Paul Krugman’s 2012 book “End this Depression Now!” he comes heartbreakingly close to connecting the dots between the reduction in the progressivity of the tax system and the cycle of overinvestment that caused the depression. He states that the book is much less concerned with the cause of the depression than what should be done to end it. His prescription is fiscal stimulus focused on the spending side that has even less of a chance of being enacted than the tax cuts suggested above.

Those on the right have their own version of the regulatory fallacy. They blame the government sponsored enterprises Federal National Mortgage Association Fannie Mae (FNMA) and Federal Home Loan Mortgage Corp. (FMCC) and the Community Reinvestment Act. According to their theory, regulation such as the Community Reinvestment Act resulted in a vast increase in subprime mortgage lending that caused the financial crisis. Possibly the non-bank private entities that originated and securitized the most of the subprime loans mistakenly thought the Community Reinvestment Act applied to them.

A slight variation on the regulatory fallacy is the financial innovation fallacy. As with the regulatory fallacy, both left and right versions, there is a miniscule grain of truth to it. Financial innovations such as credit default swaps and regulatory changes like repeal of the Glass-Steagall Act slightly affected the exact timing of the onset of the depression. However, once the tax burden was shifted from the rich to the middle class it was just a matter of time before middle-class consumers became unable to absorb the increased production and service the debt that accompanied the overinvestment. Different regulatory policies might have shifted the bubble more towards commercial real estate rather than residential real estate or visa versa but the outcome would have been similar.

Blaming regulatory policies and financial innovation for the depression is like blaming the armaments manufactures and soldiers for World War II. In order for the war to occur there had to some weapons made and some soldiers to fight. If those particular armaments manufactures and soldiers were not available, others would have taken their place.

Equally unhelpful in terms of addressing the income and wealth inequality which results in the overinvestment cycle that caused the depression are those who emphasize various non-tax factors. Issues such a globalization, free trade, unionization, minimum wage laws, single parents, problems with our education system and infrastructure can increase the income and wealth inequality. However, these are extremely minor when compared to the shift of the tax burden from the rich to the middle class. It is the compounding year after year of the effect of the shift away from taxes on capital income such as dividends over time as the rich get proverbially richer which is the prime generator of inequality..."
http://seekingalpha.com/article/1543642

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